Use Market Optimism to Buy Cheap Options

A sharp fall in the S&P 500's fear gauge offers investors the chance to wager on stocks Goldman Sachs believes are poised to rally.

Rather than using the VIX to extrapolate broader meaning for the stock market, sophisticated investors often use the so-called market fear gauge as a compass to select stocks to trade.

When the Chicago Board Options Exchange's Volatility Index, known more familiarly as VIX, is low during earnings season, as it is now, fleeting opportunities are suddenly created for investors to buy bullish calls to speculate on earnings.